For a Giffin good,the income effect works in the opposite direction from the substitution effect,and the income effect is larger than the substitution effect.

Question

Quizplus · Accepted Answer

For a Giffin good, the income effect works in the opposite direction because as the price of the good rises, the consumer feels poorer and will increase the quantity demanded of the inferior good. The income effect tends to dominate the substitution effect in the case of Giffin goods.

For a Giffin Good,the Income Effect Works in the Opposite